Gold Price Forecast: XAU/USD consolidates around 100-day SMA as traders await Fed, ECB policy meetings

Gold price struggles to gain any meaningful traction on the first day of a new week and remains confined in a narrow band around the 100-day Simple Moving Average (SMA) through the Asian session. The XAU/USD currently trades just above the $1,960 level, nearly unchanged for the day, as traders keenly await this week's key central bank event risks before positioning for a firm near-term direction.

The Federal Reserve (Fed) will announce the outcome of its two-day policy meeting on Wednesday and is expected to hike interest rates by 25 basis points (bps). Investors are also betting that the Fed will signal an that its is coming close to the end of the current rate-hiking cycle. That said, doubts that the Fed will commit to a more dovish policy stance assists the US Dollar (USD) to preserve its goodish recovery gains from the lowest level since April 2022 touched last week and acts as a headwind for the Gold price. Hence, the market focus will be on the accompanying monetary policy statement and Fed Chair Jerome Powell's comments during the post-meeting press conference.

This will be followed by the European Cetnral Bank (ECB) meeting on Thursday. The broader consensus is that the ECB will again raise borrowing costs by 25 bps and reiterate its committement to continue the current hiking cycle to contain stubbornly high inflation, which is anticipated to stay above the 2% target through the end of 2025. The prospects for further policy tightening by the Fed and the ECB turn out to be another factor capping the upside for the non-yielding Gold price. That said, any meaningful slide for the XAU/USD seems elusive in the wake of growing concerns over slowing economic growth in China, the worsening US-China trade ties and geopolitical risks.

Hence, it will be prudent to wait for strong follow-through selling before placing aggressive bearish bets around the Gold price and positioning for an extension of the recent pullback from over a two-month peak touched last week. Market particpants now look to the release of flash Purchasing Managers' Index (PMI) from the Euro Zone and the United States (US). The data will provide fresh insights about the ecomic health, which, in turn, will drive the broader risk sentiment and provide some imepetus to the safe-haven precious metal. Apart from this, the USD pricey dynamics will be looked upon to grab short-term trading opportunities around the XAU/USD.

Gold price technical outlook

From a technical perspective, the $1,952 level, followed by last week's swing low, around the $1,946-$1,945 region, should protect the immediate downside. Some follow-through selling, howver, will suggest that the recent upward trajectory witnessed since the beginning of the current month has run its course and pave the way for deeper losses. The Gold price could the accelerate the fall towards the $1,934 horizontal support en route to the $1,926-$1,925 region. The next relevant support is pegged near the $1,909 area, below which the XAU/USD could weaken further below the $1,900 mark and retest the multi-month low, around the $1,893-$1,892 area touched in June.

On the flip side, any meaningful positive move now seems to confront stiff resistance near the $1,977-$1,978 zone. This is followed by the monthly peak, around the $1,987-$1,988 region set last week, above which the Gold price could aim to reclaim the $2,000 psychological mark. The upward trajectory could get extended further towards the next relevant hurdle near the $2,010-$2,012 supply zone.

Key levels to watch